Budget Battle Includes Fight to Preserve Retirement and Health Care Benefits
Over the past several years we have watched a steady, unwarranted attack on our retirement and health care benefits. What once was considered a taboo subject is now being openly discussed here in Sacramento. If you watch the news or read the paper you have noticed the Mantra of “unsustainable benefits” and “overly generous pensions” has become a drum beat of various interests groups targeting labor unions. These very same groups are intensifying the pressure and have taking advantage of the budget stalemate that is stagnating Sacramento.
These interest groups are proposing a huge rewrite of statutes that directly affect public sector workers like firefighters. They are putting these proposals forward under the guise of creating efficient government or saving funds for the welfare of Californians. What is so dishonest about this current attack is that any of these proposed changes to retirement and health care benefits would do nothing to solve the current budget crisis. It is all a ruse designed to take advantage of the situation and play on the public’s fears. We face a real danger of losing hard fought benefits that took decades to achieve. Sacrifices were made to obtain these benefits through trades off in collective bargaining. And now, with the stroke of a pen some or all could disappear.
This fight has been ongoing and will remain in the forefront. There is nothing more important on our plate than preserving our well deserved pension and health care benefits. We know we have public opinion on our side. The citizens of California, when told the truth about pensions and benefits, understand the lifetime of sacrifice you make risking your life for others. Most citizens realize and agree you should be allowed a fair retirement and decent health care.
Let me make this very clear, we are in this battle and plan to see it through to the end. We do not intend on losing and we are maintaining a constant vigil with a can-do team. If and when we need more help from you, the proud members of this Union, be it financial or hands-on, we will without hesitation put out the word. As you always have, we know you will respond; it’s in your nature. We have our entire team in Sacramento focused on the issue, we are walking the halls of Capitol and talking to policy makers, carrying forth a simple message; do not kill collective bargaining, do not make wholesale changes to our benefits without first coming to the table and discussing such changes with us.
Some of the proposed changes to our pension and health plan benefits are shown below with a short description of each.
June/July 2009 Budget Negotiations/Proposed Changes
Each of the proposals to change the current pension and health plan premium benefits will affect certain groups of our members in different ways and at different times. This list is a synopsis of the proposals we have heard about and the direct effect on our membership, either by individual or group. Obviously, there could be more proposals made that are not included herein and will be addressed separately when they arise.
3 Year Average for Retirement Calculation, from the Current One Year,
for New Hires on or after July 1, 2009
Employee would be required to select the continuous, 36 month period to be averaged to calculate the monthly retirement pay. Currently, employee chooses the continuous 12 month period to average for the final pay calculation.
Since the 3 year averaging would not be used until new hires start retiring, the direct savings to the state would be minimal. The new methodology would be used by the CalPERS actuaries to determine retirement contribution rates using tables that stretch out at least 30 years. This item does very little to help with the current budget deficit.
Retirement Contributions to Start with the First Dollar Earned Instead of After the First $238
Currently, your contribution rate to your retirement fund is calculated starting after the first $238.00. For someone making $4,000 per month, the retirement contribution of 8% would apply to all $4,000 equaling $320.00 per month. Currently, the calculation applies after subtracting the first $238.00 or $4,000 minus $238.00 times .08 equaling $301.00. The difference is $19.00 per month or $228.00 per year, 5.7%.
Savings to the state would be immediate and would be a direct loss to our members upon application.
Statutory Changes to Adjust Contribution Rates Shall Supersede
All MOU Provisions Should There be Any Conflicts.
(Takes away any language in any MOU that would change contribution rates for retirement)
This provision takes away any authority to negotiate contribution rates at the bargaining table. This removes the ability of the bargaining team to negotiate contribution rates. Instead, contribution rates would need to be included in a statutory change as part of a legislative bill.
All new hire firefighters in Bargaining Unit 8, after July 1, 2009, would be placed in the POFF formula of 21363.1 of the Government Code, 3% at 55. While these “new hires” would be eligible to retire at age 50, the full enhancement would not be realized until age 55.
Savings to the state would be calculated by the actuaries when setting employer contribution rates. The immediate impact would be minimal as any savings would be part of the actuarial calculations using tables over a 30 year period.
In addition, most employees would be required to stay on the job until at least age 55 to obtain the maximum 3% at 55 benefit. Staying on the job longer would have an offsetting negative effect on the state because top-step employees would stay longer at the higher salary and differential levels thus reducing any anticipated savings to the state.
While there may be some minimal savings to the employer over the long term due to a small reduction in employer contribution rates for retirement, there will also be an offset to any savings due to top-step employees at the highest differential levels staying on the job longer to reach their maximum benefit.
Public Employee Medical Health Care Act (PEMHCA). Proposed Language Allows the State to Administer PEMHCA along with CalPERS.
The direct intent here is to provide statutory language providing another authorized entity of the state to administer PEMHCA. The current authority rests with CalPERS. This language would allow an entity of the state, such as DPA, to administer the health plans including the setting of rates and plan design.
States Duties and Rights of Board . . . . . Government Code Section 22850.
This section would allow the state to administer PEMHCA for all members of CalPERS including local, public agency members. This change could completely gut the current Health Benefits Branch of CalPERS and shift that responsibility to the state.
In earlier writings, the state indicated it may contract out these responsibilities. However, nothing in the current proposal suggests that is the plan.
The proposal appears to allow plan designs for state employees to vary by region. Currently, plan designs for state employees must be the same statewide. This approach could further reduce the value of health plans available to members in the remote areas of the state. By allowing different plan designs, the costs associated with different plan designs could vary widely and the type of health care available to some would not be available to others based on geographic assignments.
Savings to the state are unknown. Previously, the state suggested a target of $132.5 Million by offering an alternative health plan and by direct administration. Any savings would likely be routed into the state general fund. Currently, CalPERS has used savings to offset future rate and/or co-pay increases.
Employees Hired on or after July 1, 2009 Would be Subject to the State Employer Contribution Rate for Post Retirement Health Plan Rates for Active Employees. Currently, the Rates are 100/90 for Retirees and 85/80 for Active BU 8 Employees.
Savings to the state would not be appreciable until those that are hired on or after July 1, 2009, begin to retire, approximately 20 to 30 years based on the current method of funding post retirement health/dental plan premiums. The current system is pay-as-you-go from the general fund. The state currently uses some funds paid to the state from the federal government for participating in the Medicare Part D Prescription Drug Program to offset the premium costs.
Savings to the state could start sooner if the state agreed to pre-fund certain post retirement health plan benefits such as premiums for health and dental plans. Pre-funding would provide investment returns to offset direct contribution rates much like the current pension system investments offset contribution rates. As a point of reference, $.75 of every dollar paid to current retirees comes from invested funds, not the principle investment.
State Employees Hired on or After July 1, 2009, Would Become Eligible for Full Employee Retiree Health Plan Contributions After 25 Years of Employment.
Currently employees are vested for post retirement health plan contribution rates starting at 10 years (50% of contribution rate) going up 5% per year up to 20 years to be completely vested for the 100/90 contribution formula.
This proposal would require an employee to have 25 years of employment before being fully vested. It is not clear if there is a point that vesting starts at a lower level. Also not clear is if the employment must be continuous or cumulative. Currently, the cumulative total is used to determine the vesting level of employees.
If the full vesting requires 25 consecutive years, this could negatively impact members that may have worked with another employer and then joined state employment at a later date or the employee left state service and at a later date, returned to state service. For those employees starting a career with Cal Fire at a later stage in their life, becoming fully vested may take a longer period of time than they are willing to work. This can have a sobering effect on certain employees causing some to leave state service looking for a better benefit package.
Brothers and Sisters we are facing real threats to parts of our benefit packages that took decades to secure and came in lieu of many salary enhancements. We are fully committed to fighting these major hits to our members; our entire team is engaged and all our resources will be deployed. We may be calling on individual members to step up and fight with us in the coming weeks.
We have been down difficult roads before but nothing like this one, the outcome is far from certain and we are working day and night. We are a grassroots organization if you have ideas or questions do not hesitate to contact us.
Stay proud, Stay strong and Stay union
Bob Wolf, President